Looking for stocks with high upside potential? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 26% in 2019 (through November 22nd). Conversely, hedge funds’ 20 preferred S&P 500 stocks generated a return of nearly 35% during the same period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ consensus stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like FLIR Systems, Inc. (NASDAQ:FLIR).
FLIR Systems, Inc. (NASDAQ:FLIR) investors should pay attention to an increase in hedge fund sentiment of late. FLIR was in 22 hedge funds’ portfolios at the end of September. There were 20 hedge funds in our database with FLIR positions at the end of the previous quarter. Our calculations also showed that FLIR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In today’s marketplace there are several metrics stock market investors put to use to size up publicly traded companies. A duo of the less known metrics are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the top picks of the top fund managers can outperform the broader indices by a significant amount (see the details here).
Lee Ainslie of Maverick Capital
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s take a peek at the recent hedge fund action regarding FLIR Systems, Inc. (NASDAQ:FLIR).
How are hedge funds trading FLIR Systems, Inc. (NASDAQ:FLIR)?
Heading into the fourth quarter of 2019, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 10% from the previous quarter. On the other hand, there were a total of 27 hedge funds with a bullish position in FLIR a year ago. With hedgies’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
The largest stake in FLIR Systems, Inc. (NASDAQ:FLIR) was held by Royce & Associates, which reported holding $79.9 million worth of stock at the end of September. It was followed by D E Shaw with a $68.3 million position. Other investors bullish on the company included AQR Capital Management, Alyeska Investment Group, and Nokota Management. In terms of the portfolio weights assigned to each position Prospector Partners allocated the biggest weight to FLIR Systems, Inc. (NASDAQ:FLIR), around 1.63% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, dishing out 0.74 percent of its 13F equity portfolio to FLIR.
With a general bullishness amongst the heavyweights, some big names were breaking ground themselves. Nokota Management, managed by Matthew Knauer and Mina Faltas, created the most valuable position in FLIR Systems, Inc. (NASDAQ:FLIR). Nokota Management had $16.9 million invested in the company at the end of the quarter. Lee Ainslie’s Maverick Capital also initiated a $3.3 million position during the quarter. The other funds with brand new FLIR positions are Richard Driehaus’s Driehaus Capital, Mike Vranos’s Ellington, and Michael Price’s MFP Investors.
Let’s now review hedge fund activity in other stocks similar to FLIR Systems, Inc. (NASDAQ:FLIR). These stocks are Americold Realty Trust (NYSE:COLD), Woori Financial Group Inc. (NYSE:WF), Pearson PLC (NYSE:PSO), and Hill-Rom Holdings, Inc. (NYSE:HRC). All of these stocks’ market caps match FLIR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| COLD | 27 | 472297 | -3 |
| WF | 2 | 2420 | 1 |
| PSO | 3 | 5491 | -1 |
| HRC | 26 | 663107 | -1 |
| Average | 14.5 | 285829 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.5 hedge funds with bullish positions and the average amount invested in these stocks was $286 million. That figure was $269 million in FLIR’s case. Americold Realty Trust (NYSE:COLD) is the most popular stock in this table. On the other hand Woori Financial Group Inc. (NYSE:WF) is the least popular one with only 2 bullish hedge fund positions. FLIR Systems, Inc. (NASDAQ:FLIR) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately FLIR wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on FLIR were disappointed as the stock returned 2.2% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
